Effect of six dimensions of culture on international business

International Business takes place between entities of different types and sizes and across international borders in different ways.  Depending on the where each entity is located and where each phase of business takes place in a value chain between entities, different cultures of different countries will shape the varied and interconnected departments and elements of any business and any international business transaction.  Hofstede created a framework within which he catalogued different cultural traits by way of collecting questionnaires from 116,000 IBM Employees, and collected data on the IBM Employee’s values and attitudes in six independent dimensions of national culture (Cavusgil, Knight & Riesenberger 2017: p. 74-75).   The six dimensions Hofstede used were: Individualism v. Collectivism, Power Distance, Uncertainty Avoidance, Masculinity v. Femininity, Long-term v. Short-term Orientation, and Indulgence v. Restraint.  These six dimensions of culture give business professionals a general guide for gaining insight into cultural issues which are important in the realm of international business (p. 75).

Below I will briefly cover the effect and role of the six dimensions of culture that make up Hofstede’s model and discuss the effect of each on international business:

Individualism v. Collectivism as a dimension of culture is the continuum that measures the degree to which the people in a given society culturally function as individuals or as parts of a group (p. 74).  Individualism based cultures like the United States of America puts a premium most often on competition and coming out on top (p. 74).  There can be a lack of introspection and relationships in business and work situations can be strained in order to meet goals.  This is often the way that American Businesses tend to trend.  In a collectivism based culture that places relationships at the top of the importance hierarchy, the views of other group members are highly valued.  Compromise and cooperation are highly valued (p. 74).  Asian Countries often have cultures of this kind.

Power Distance is how a society deals with the inequalities in power that exist among people (p. 74).  When a society is a low power distance society, the gaps are small between those with power and those without power.  In a high power distance society, inequalities grow over time and those with power do not care about the development of large gaps.  It is easy to see the connection between High Power Distance societies and more Masculine end of the spectrum societies.

Uncertainty Avoidance is the measure of the continuum between cultures with the ability to tolerate a large amount of risk and cultures with a low tolerance for risk (p. 74).  In a high uncertainty avoidance culture, institutions minimize risk and ensure financial security.  More research goes into the managerial decision making process and options are weighed.  In a low uncertainty avoidance culture, socialization forms members into people who can accept uncertainty and are very comfortable with it.  Managers make decisions quickly and are more entrepreneurial.  Not threatened by different behavior and views than their own.

Masculinity v. Femininity as a continuum is a society’s orientation based on traditional male and female values (p. 74).  In masculine cultures, both men and women are rewarded for more aggressive traits, self-confidence and leadership.  In feminine cultures, gender roles tend to overlap and both genders display nurturing and interdependence with a premium placed on minimizing conflict and increasing the quality of life.

Long-term v. Short-term Orientation: How thoroughly different cultures defer gratification so as to achieve some longer-term goal or success (p. 74).  Long-term societies have a longer view of success coming after a decade or so and are more relationally oriented.  Eastern Cultures are long-term societies.  Short-term societies have a shorter timeline for measurement of success and tend to be more transactionally oriented.

Indulgence v. Restraint: Extent to which members of a culture try to control their desires and impulses (p. 75).  In an indulgent culture, people at work express their opinions, give feedback and aim to be happy at work and have a positive attitude (p. 75).  In a rrestrained culture, people suppress the need for gratification and the happiness of the individual is less valued.  People do not express their own personal opinions (p. 75).

International business activities across any of these six dimensions of culture have different ways they play out.  It can be taxing and insulting for a culture on one end of the spectrum of any of the six paradigms to attempt to approach the other business from the other end of the spectrum of the paradigm with an ethnocentric approach.  It cannot be the a business’s own culture by which a business formulates a method of interacting with another business, the other business’s culture has to be taken into consideration.  That having been said, there are midway solutions in each of the dimension based paradigms due to the fact that the business on the other end of the spectrum is also attempting to develop a decent working relationship with the other business as well.

Though some say there should be additional categories in any cultural framework of understanding in order to develop a deeper understanding of international business issues, these 6 categories have been seen as classics since 1970 (p. 75).  Additional categories might include Deal v. Relationship Orientation or include elements of the 4th phase of globalization which has gone on since 1980 (p. 75 and p. 29-30).  Triggered by the advent of the internet, personal computers and web browsers (p. 30), the basic technological phase of international business which we are in now might have been ignored by Hofstede with respect to widespread exposure to global media, general technology advances beyond just the advent of personal computing, web 2.0, web 3.0 as well as changes in the roles of women and ethnic groups in the workplace (p. 75).  Though based on the answers of IBM Employees only, and done via questionnaire rather than deeper interview techniques (p. 75), the insights have proven invaluable and have stood up to many tests over the last 50-years.

Bibliographic Information

Cavusgil, Knight, & Riesenberger (2017). International Business, the New Realities (4th ed., pp. 29-39, 74-75). Pearson.